How big data can save a terawatt hour of energy

Energy data startup OPower says its software and big data tools will be able to help save one terawatt hour worth of energy collectively from U.S. homes by the end of 2012. One terawatt hour (or 1 million megawatt hours) is equivalent to the energy consumed by 100,000 American homes over a year, and is worth a whopping $100 million in consumer’s utility savings.

Opower is one of the rare startups in the greentech world that hit on a solid software-based idea early on and is now charging ahead and growing at a rapid pace. Founded in 2007, Opower’s smart algorithms collect and crunch utility energy consumption data, analyze it for behavior-changing tidbits, and package the results into a detailed utility bill that can help consumers save around 2 percent on their energy bills. The bills can compare customers to their neighborhoods as a whole (leveraging shame, guilt or the competitive spirit), and recommend tips for saving energy.

Two percent might not sound like a lot, but collectively, it’s making a significant dent in U.S. home energy consumption. Already, as of April Opower had collectively saved 200 gigawatt hours of energy since it started, which is enough energy to power the Empire State Building for three-and-a-half years or the entire country of Cambodia for a year. (Opower has a nifty energy savings ticker on its new website). As of today, the company is about a third of the way to its one terawatt hour by 2012 goal.

By the time Opower’s ticker reaches a terawatt hour, the rate at which it will be saving consumer’s energy will be higher than the rate of solar power produced in the U.S, says Opower. One of the not-so-secrets to its success has been generating utility deals. Opower isn’t yet a direct-to-consumer company (but maybe one day) — and Opower has at least 30 live utilities deals going right now.

For those not schooled-in the utility world, utilities rarely make deals with tech startups, despite the vast number of vendors trying to sell them stuff. But Opower managed to win over utilities early on because its software and service are low-cost, compared to various networking hardware and software tools, or deploying in home energy management displays. It has also focused on being pretty low-tech in what it offers to utility consumers, opting to mail customers paper bills for much of its service.

But the software engine of its system is decidedly not low tech. The company is doing about 56 billion meter reads a year, and by the end of 2011, it will be getting over 100 billion readings off the meters. Opower then crunches those terabytes of data, and combines it with data that it gets hourly from things like temperature, housing, and weather information. As Om put it earlier this year, OPower is like Zillow, except a whole lot bigger.

Using big data to reduce energy consumption is a growing trend, but one that Opower has pioneered. A company called EcoFactor is also using big data sets and algorithms to automatically turn down connected thermostats, and said last week it can save customers 17 percent on their energy bills. EcoFactor’s business model is a lot riskier and more difficult to implement than Opower’s but could also have a similarly significant impact on energy savings if it can convince partners like utilities, broadband service providers and home automation companies to sign up.